Is Wellington the new Auckland?
Parochial Wellingtonian’s may bristle when reading this
headline. Having lived in Auckland for 18 months I can testify first hand they
are good people but for many of them, life seems to stop after the Bombay’s.
Many consider Wellington & its region to be a dead, my opinion is that it
is the opposite and has a vibrancy that Auckland will never hope to replicate
due to its landscape and concentration of art, culture and alternative people.
Who else would give Gareth Morgan a mouth piece to spread his views on felines?
However, there is one area where I believe we are starting
to look a lot like Auckland and that is in our Housing market. Early signs
started to show through in December with limited supply and purchaser having to
pay at least asking prices and finding themselves in multiple offer. Sellers began
finding it relatively easy to get their asking price.
Then the 5th of January came around. Being a
start-up business owner I thought I would do work as it came in but wouldn’t
have to start back till maybe the 12th of January and ease back into
it. Boom! By the end of that short week 6 new preapprovals to do and the flood
gates opened. It’s barely slowing to a manageable pace now but this may be the
lull for winter. I’ll never refuse a client either, the more the merrier!
Needless to say for buyers it’s become a tougher market in 2016. If you find
something at GV or below its got major deferred maintenance or it’s a steal not
tested fully in the market. It’s nothing to see properties in central Wellington
$250k above GV and $70k-$100k over GV in the Hutt Valley. A large site that can
have multiple townhouses put is even harder to estimate and we have seen these
go well above GV in the Hutt Valley +$200k.
For sellers its great. They are happy as Real Estate agents
are exceeding expectation, putting a fixed price on a property seems to be a
huge folly for a seller as the market marches on week by week.
There are a few key points for both seller and buyer to
consider in this hot market. Get it wrong and it gets expensive for both.
- Get pre-approved to a maximum for your finance, do this before you start looking so you are well prepared when you find that Dream Home.
- Do as much due diligence as possible before buytime – work with valuers, building inspectors, mortgage advisers early and build a team you trust.·
- Get a tender price sorted early and find out what others are saying about the property regarding price so you don’t over or under shoot.
- The best offer isn’t necessarily the one with the highest price – talk to me about financiers and strategies to make your offers clean. Its fine to say make it “clean” but what happens when the bank imposes restrictions on you?
- Find out what your vendor wants – High price as they are stretching on their new property? Quick Settlement? A larger deposit?
- Don’t, I repeat don’t take time out of the market by selling and not having a property lined up if you plan to buy again.This market moves week by week – we have seen it (anecdotally) move 15% -20% in 4-5 months.
- The old adage is you make money when you buy not sell – which probably seems odd given the market. Don’t undersell your property, see what else is selling on your street or size/style of property
- Markets move like a stone being dropped in a pool of water, the ripple effects are the buyers being pushed out from central Wellington and that moves the market price out to the surrounding areas
What’s causing all this frantic market activity after so
many years of nothing really happening in the local market? You may say it’s
the media inflating the housing crisis and capital gains occurring after so
many years egging on investors. Principally I believe its migration that is
causing our issues. Net migration between April 2015 and April 2016 was a
staggering 68,110 according to Statistics New Zealand. New Zealanders net
migration is minus 3560 so NZers are still leaving to live offshore, this was
net -23,870 in 2006 as Kiwis went to Australia chasing their booming economy.
Non NZ citizens’ statistics are now +71,670 to April 2016, from +33,945 in 2006.
This is a key figure as these new NZers need to find housing in our main metro
To summarise, limit the net migration and you sort out your
capacity issues in Auckland, we are over complicating this issue with banking
restrictions and so on. Turn the immigration tap on when the economy/asset
prices needs stimulus turn it off again now. Central Government and the RBNZ really
need to work together to sort this out. At least turn the tap down.